Cross-border payments hold promise for expediting international payroll - National Automated Clearing House Association's Cross-Border Payments program

HR Magazine, March, 1998 by Timothy A. Lavery

* Payments are originated and received in the national formats that the participants are already using, which minimizes system modifications.

* The efficiencies of the respective national payment systems afford predictability in the timing of payments and dramatically cut the payment cycle time for cross-border payments, compared with paper checks. Payments are usually transmitted in three to five days.

* The receiver of payment receives the full payment amount because fees and charges may not be deducted from the payment.

* The foreign exchange conversion terms and conditions may be more attractive to participating companies.

* The relative cost-effectiveness of batch-oriented payment systems should result in savings.

CAUTIONS

In addition to the U.S. banking holidays, companies now have to be aware of the Canadian and Mexican banking holidays. Thus, there may be two or three times as many days in which they cannot transmit direct deposits. As more countries become part of the program, keeping track of the respective banking holidays will be very important. Time zone differences will also be a factor to contend with once international participation increases.

The payment format, known as "NACHA Format," will be slightly different with cross-border payments. The problem is that each nation's domestic ACH systems are slightly different in terms of formats, number of digits in routing numbers, account numbers and so forth. Also different is the issue of prenotifications. Though prenotes are used heavily in the United States, the Canadian ACH System does not support prenotifications. Additional quirks may be found in the cross-border payments system once other countries become involved.

FUTURE DEVELOPMENTS

As part of the plan to expand cross-border payments to other countries, the Cross-Border Council held a special International ACH Conference last May in Edinburgh, Scotland. Officials at this meeting agreed to a follow-up meeting in 1998 to review additional information and action items they established. And last fall, NACHA hosted a Latin American ACH Conference in Miami. Japanese financial institutions have expressed interest in meeting with the CBC to determine the feasibility of transpacific cross-border payments. Because other countries in the Pacific Rim are also interested in cross-border payments, the CBC will be meeting with Asian financial officials during the International ACH Conference being held in Seattle this month.

As vendors of HR/payroll systems begin packaging the cross-border payments function into their ACH modules, this program will really begin to expand. You can count on seeing more participants, more users and more nations being added to the program. The future of cross-border payments can be described only in terms of global growth.

For more information on cross-border payments, see the web site of the National Automated Clearing House Association (NACHA) (http://www.nacha.org).

The Payroll Manager's Guide to Successful Direct Deposit (11th Ed.), published by the American Payroll Association, includes a chapter on cross-border payments. The guide can be ordered by phone, (210) 4462600, or through APA's web site (http://www.americanpayroll.org).